Yup, true uncanny valley - it's clear that this is something similar to banana but significantly different, it doesn't behave like a banana at all but like dough or modeling clay in the shape of a banana.
I'd never considered how a banana would look like when cut, and I'm not certain how it should look but I'm certain that it's not like this.
The banana example comes from the MLS-MPM paper[1]. MPM is basically a way of simulating deformable solids using particles. The big thing that the MLS-MPM paper achieved was that the particles wouldn't magically interact with their neighbours on the other side of a thin solid.
The example is kind of ugly, but it's really only trying to illustrate one specific property of their simulation: that the knife can properly separate neighbouring particles from each other without any spooky interactions between the banana on one side of the knife and the banana on the other side.
I'd never considered how a banana would look like when cut, and I'm not certain how it should look but I'm certain that it's not like this.